TransDigm (TDG) 9 May 232023 Q2 Earnings call transcript

Good day! And thank you for standing by. Welcome to the Q2 2023 TransDigm Group Incorporated Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker's presentation there will be a question-and-answer session [Operator Instructions]. Please be advised that today’s conference is being recoded.

to today, conference of Jaimie for like first to Investor now TransDigm. for speaker Stemen, would hand over the your Relations I the Director ahead. go Please

slide Conference Fiscal Thank Mike are morning Lisman. and Financial information. website Officer, and deck Kevin our Second you, Jorge to Officer, President on at TransDigm's Please Executive obtain Chief and Quarter call visit welcome TransDigm's a Earnings replay transdigm.com Officer, Stein; Call. Chief this Valladares; Presenting the Chief supplemental XXXX call to Operating and

we like Before call, to you that in begin, not fact, statements. are this during remind the company forward-looking are would statements which historical made

forward-looking information materially of to the statements, results important about the could that company's to latest further filings from cause available section or differ expressed sec.gov. Investors with through the actual at the please For those SEC our refer factors in or website implied

reconciliations. you referring like The specifically and course be will net per adjusted advise comparable company Please measures adjusted of which also we income for presentation measures. in directly non-GAAP the earnings that financial the would to as tables a the share, all during most defined, call the to related of earnings EBITDA and applicable EBITDA, are release the and see of footnotes GAAP

I call to over turn will the now Kevin.

Good morning. Thanks for calling in today.

‘XX strategy, First the fiscal quick Jorge comments Then few a our the the Mike I'll quarter. about color with and will of on off our outlook. start overview give and quarter discuss usual additional

well value the all on good times of the aerospace through in as industry as both in of we phases cycle. consistency our unique are To bad, focus creation strategy intrinsic our steady believe the reiterate, we shareholder and in

specifically. revenues, generated provided have over some We higher of aftermarket the unique relative believe reasons EBITDA by generally net extended downturns. To proprietary are strategy sales this: period consistent have typically About any summarize, follow in comes margins we Most from products. and XX% which our significantly a of our of here why long-term stability are the

proprietary content. First, with and aftermarket businesses we operate significant own aerospace

Second, method. operating value-based we utilize a simple well-proven

and we PE-like Third, we have where clear structure acquire aligned a system see path strategy closely creation businesses organizational a shareholders. And value we fit and a that decentralized lastly, this methodology. our key to with of Fourth, are returns. unique allocations part capital our compensation structure

we is give returns to Our of the with public shareholders a details both allocation of on well goal equity-like capital. careful creation, of value long-standing this, the as private stay our market. our To liquidity focused do as

quarter. we from As earnings release, you saw another had our strong

QX raised expectations, Our for results guidance we again and ran the ahead our year. of once our

recovery for demand trends We commercial in travel are aerospace continue the still to remains market see favorable robust. and as

forward. is moving Global China's traffic international the traffic lead since continues expanded especially domestic air reopening travel its recovery, also significantly but air in travel. January, air has to domestic

still be travel as depressed demand made to in industry results comparison pre-pandemic the affected is there is continue to for However, progress pre-COVID from adversely our be since air slightly to still levels for levels. the

sequentially quarter of OEM, outpaced bookings. aftermarket, defense. and all another saw commercial channels, major our substantial and growth bookings we business, of for our commercial in market improved market commercial In Revenues revenues revenues Also, of each channels. our total three in these

and our in strict Contributing defined in strategy margin to the margin recovery ongoing commercial this quarter. the our to operating focus on XX.X% revenues. aftermarket our as EBITDA strong improved is

over ended about Additionally, flow of $XXX $X.X quarter QX cash. we billion in with cash the operating generated of million and

additional steadily to generate expect We throughout the of remainder cash XXXX. significant

activities Next, an update on our capital priorities. and allocation

to transonic we state-of-the-art X. million defense development and across has markets. Calspan for a in it established utilizes tunnel both Corporation wind the aftermarket-focused range closed Calspan The diverse aerospace and perform aerospace cash. quarter commercial we happy are testing Calspan positions defense that of has a testing the for May During to and acquire report, $XXX acquisition, agreed yesterday to approximately services.

centered Calspan's with unique service component consistent offerings exhibit the earning businesses. stability that potential and aerospace our growth are

about are expect the exceed our excited and meet the of to acquisition long-term value business or Calspan We objectives.

acquisition just Calspan fiscal TransDigm to as of Calspan ‘XX the to over in be expect to just than margin less defined the We million and revenue margin. company contribute total for ‘XX $XXX year year the half our EBITDA fiscal

current M&A pipeline. the Regarding

look M&A actively opportunities for to fit continue model. that our We

we next a potential XX of stronger the slightly we typical look As to targets. months, pipeline than have out over XX

comment remain I usual, runway As possible fit range. are that targets acquisitions we predict for closings, is small or on midsize and long that there our cannot confident the potential but the portfolio. mostly in a

priorities The unchanged. allocation at TransDigm are capital

reinvest is our priority to first Our in businesses.

to do return option, And A down this consideration. to buybacks third, shareholders via dividends. accretive M&A. take into though we still Second, or paying capital our unlikely shared seems do time, debt, this fourth at

M&A currently capital are allocation to predict. and are capital all our always markets both We evaluating difficult options, but of

to continue capital flexibility other foreseeable liquidity maintain significant range of meet financial future. any or readily We the to likely requirements in opportunities and

available we for increasing year noted Calspan in sales Please remainder EBITDA information ‘XX just utilized acquisition that on May Moving full release, year. in and as defined our quarter results, the limited include the fiscal acquisition recent within year our current earnings note, of ‘XX, second to X, Calspan, fiscal to as outlook strong our guidance as our our the of we our reflect to guidance. currently are the Calspan expectations the for closed

preliminary refined over necessary Our for months. coming as be will expectations the Calspan

markets The ‘XX and divestitures. raised as defined our At remainder the was sales primary $XXX commercial or was of fiscal guidance midpoint, throughout no additional recovery and raised the million the end in acquisitions $XXX million. continued guidance assumes EBITDA guidance

in $X.XXX assumptions commercial guidance year of channel result In our second and for the our the year. assumptions the expectations market year the OEM on, commercial market on as aftermarket, is for approximately presentation. growth current or a updating are strong and found based Our up be can is as current follows XX%. quarter regards revenue is guidance revenue of to we this midpoint results rate The remainder guidance of now rate and full billion Slide the growth the that X

We revenue and the increase commercial now which XX%, which range. an from commercial OEM of range the in guidance guidance to increase XX% previous mid-teens XX%, growth high-teens percentage XX% our an revenue of growth from is to range aftermarket expect expect of of percentage previous range in is our

aftermarket and commercial The hope well that in been ‘XX our progressing fiscal we continues. has

aim orders few into months and the advanced future. we so to commercial out the aftermarket guidance as predict to this only going book or a be and with is being ship, many However, the with conservative harder bookings

based is issued Defense still previously growth revenue channel guidance the market on rate assumptions.

underlying updating growth market changed. market full not the this are fundamentals channel at have for defense meaningfully not We time year as rate

We in growth defense to expect low mid-single the digit revenue range. percentage

billion XX% The dilution includes now This with XX of margin points an up of and just a midpoint basis from Aerospace Calspan of from about guidance approximately recent acquisition dilution the of guidance our expected around XX acquisition. EBITDA $X.XX or is margin DART over as defined XX.X%. the point basis margin

of ‘XX discuss to guidance, fiscal over updates. and some up as we meaning XXX in other the detail dilution for basis The fiscal our assumptions or is The higher $XX.XX midpoint had adjusted of due all financial shortly anticipated Calspan, is Calspan from Mike primarily EBITDA ‘XX more approximately just EPS increasing now to year owned if is and defined proforma will be points. XX%. margin

are believe second for We the ‘XX. we well fiscal year positioned of half

markets accordingly. to We and aerospace develop and to closely react capital continue will continue watch how the

the am commercial I remain that and stating by the value performance our very conclude to stakeholders. industry. me aerospace company's We quarter this Let recovery pleased the committed of driving with for throughout

few recent me to over it items. to Now, a and other review let hand our Jorge performance

I'll results morning by everyone. good typical market start and key our of Kevin with Thanks, category. review

is I'll we For year balance on commentary compared of period XXXX. basis businesses to prior the own same forma in the in both That of call, a pro the periods. provide assuming mix the

has recent discussion includes acquisition May both Corporation periods. Aerospace quarter this from discussion included excluded Calspan of XXXX third of the DART fiscal of in market in market The XXXX May discussion. been The ‘XX. this the DART acquisition since is market

up and discussion split revenue, the close market, to we'll typically XX% OEM our which In makes commercial into aftermarket. of our

XX% Our with total compared to and period. QX. grew increased approximately by commercial OEM XX% in total Sequentially, OEM XX% the QX prior year revenues revenue bookings compared commercial improved over

across quarter to robust the the increasing achieving ramp the the towards year aerospace significantly broader outpaced rates, compared the in were remain and period sector. up encouraged We're prior production while risks same Bookings commercial by sales. OEM

are cautiously production higher targets. positioned operating optimistic We units to well support are the that our

driven year were largest by to by sub-markets revenue Now, up approximately all passenger QX. was commercial in moving sub-market, aftermarket sub-market, commercial business prior period. continued although compared commercial our is on compared XX% discussion. our prior with in Total aftermarket revenue aftermarket strength commercial aftermarket primarily of which significantly increased in our year QX to Growth the when our the

Sequentially, strong increased approximately period, aftermarket and QX bookings prior to Commercial quarter XX%. aftermarket sales. total were year outpaced bookings this commercial by revenues the same compared

reopening past demand in be Turning remain despite after revenue economic particularly pre-pandemic to Asia-Pacific broader commented of January. of travel to a COVID air the few across for region. significant market seen lower specifically traffic progressed lifting but has further this have that than recently signals, rebound miles the past travel to globe, over and global the the strong dynamics, uncertain China IATA passenger restrictions months. levels, air continues China the

only December. in in the The data to past in traffic to China over significant compared travel China. air travel months, XX% In March, is uptick pre-pandemic. great down March to levels. primarily in reported domestic IATA in was for traffic down most several a Similarly, global which about X% improvement recovery U.S. traffic due below has the from domestic X% domestic only down being X% travel Domestic only recently domestic air months also ago pre-pandemic three in sharp was strides pre-pandemic, made in the was March compared

globally continues also recently than travel about domestic. international for improve, in down international but traffic Approximately was at depressed most a traffic ago, year to the International was about XX%, data March, IATA only travel slower but a reported pace

pre-pandemic levels. to compared XX%

International levels in North America and pre-pandemic respectively. Europe XX% traffic X% of within and were

as down Asia-Pacific to continue the international China travel should reopening progresses. was XX%, still but hopefully improve about

the volumes versus continued cargo March IATA be levels. to in air year-over-year recent lower and Global pre-pandemic data most

the cargo there's available space signals wide-body flying, trade growth be outlook, continued cargo China of where recovery, passenger mixed. air for especially to the more but the trends early reopening been for positive hold belly transport. continue stabilize. has cargo too to With The global determine It's in air

months. jet levels, demand strong forecast and in and continues this the jet activity how the pandemic below We'll above Business is remain near and business the utilization does normalizes in see over operators moderate. OEMs upcoming to Business highs pre-pandemic XXXX jet term.

traditionally which revenue, approximately a and year XX% of positive compared for total QX market, defense up The activity. compared the which grew both revenue. same our Sequentially, includes total is Defense at defense to defense to defense market QX revenues which bookings X% grew when sales, solidly is revenues or by XX%. by shifting approximately this Now, prior prior below our OEM with in outpaced bookings quarter period. year and order period, the indicator future aftermarket are

be continue by Our outlays. U.S. government to lag impacted defense in spend defense market the revenues

with We but levels. see remain solid focus teams primary average progress Overall, longer supply than steady on the chain, the electronic availability. component to with remaining have continue historical still they improvement, made our

our to Kevin defense percent for continue we expect mid-single-digit to As low year earlier, growth range market revenues. mentioned this

wrap to performance excellence. operational I fiscal expressing by and executing up with our of focused structure, in cost our Lastly, value like how We on I'd second operational remain quarter ‘XX. the drivers, by am pleased

Chief like Financial With Officer, turn Mike that, to Lisman. I'd our it to over

going I'm for to quarter for everyone. few financial expectations the quickly full year. on additional morning, Good and matters fiscal hit a the

for was cash In interest the growth cash organic cash end CapEx OEM second by million less continued commercial traditionally our define cash EBITDA, and liquidity, and at rebound $XXX free TransDigm rate markets. First, on our was in as flow, quarter. organic the which quarter, taxes the On and and roughly driven aftermarket payments, growth liquidity. XX.X%, we

of cash continuing free $XXX just quarter, networking ongoing on over line, and with cash the Below net at of the and we aftermarket billion to the built cash debt the $X.X sheet, to million OEM end down consume our last balance accounts inventory quarter and receivable was X.Xx, the from ended flow ratio both support as both business. sides we ramp-up sales EBITDA of of on and quarter. that capital Xx the saw We during the approximately

about a cash net $X.X basis, On year Pro us X.Xx. the pre-COVID Calspan ratio to forma yesterday, EBITDA level that which average of the completed five debt and EBITDA of below for Xx. we puts of acquisition to debt a just have billion net

interest currently comfortable business. such in coverage we've EBITDA interest where line expense, to ratios cash with operating been operated as our the Additionally, and historically are

rising As very and always, current the we closely. environment continue to state interest watch of the debt the rate markets

During quarter, at net term the Senior as of abundance maturity of we from completed nearest rate into of out our debt as on these extended took the note second an two caution. outset Secured out the well that we refi’s loans, of that COVID The X% XXXX $X.X XXXX. of E&F we maturities effect is billion

times have not the comes proceeds as insurance the capital good bad, COVID cash we and proactive that downturn, to billion $X.X it operate excess the we business tough expect of into prudent when needing it that to While and to headed prudent. we to the continue those conservatism withstand policy in of with we ended our it, note, kind as and was structure, times. felt remain to up We'll called

Pro term and extension, note nearest our this is XXXX. forma for loan refinancing now maturity

As had slightly, is which of as some estimate guidance. that and you expense our a of net for on we kicked refinancings, interest in the result can FY’XX expense, takes updated see impact up puts today's various interest these

term. in in Over any $XX fixed and of us least balance hedged and through achieved this immediate or a ‘XX, the at is XX% swaps, interest against billion fixed rate This gross cushion of our notes, debt caps, combination colors. rate fiscal total provides adequate rise through rates, is

hedging put Specifically rate we ‘XX. see our on quarter point, past coverage another interest new some year to the on hedges in XX-Q place you'll detail during that this through on out fiscal the extend

was balance the refi’s, mechanics debt days had but on I after of note mentioned. the our completed cash the end, quarter the in that $X.X sheet quarter we cash when to on of restricted special the at just we the retirement bond due April the dispersed of cash of billion timing way couple successfully end X% One first worked,

to So note that as amount zero. balance of well on it the the as X% our pertains restricted as debt today, sheet, are as balance, both cash due

fiscal balance buybacks we cash, and in with sheet an here position or from dividends pursue sit remain overall we return to shareholders today, good liquidity, As adequate M&A or cash standpoint, we flexibility via think our during ‘XX. to

off to I'll kick it the turn to that, With back operator the Q&A.

Thank you. [Operator Instructions].

line the Robert from Melius comes Spingarn question first of Our of Research.

open. line now Your is

morning. Good Hey!

Good morning.

morning. Good

it's because it's I environment? M&A about out What's noticed you there's is better said a seemed against or Kevin, on I'm that there you are that financing wondering, little And a different than fewer little of something this sale time because going the pipeline properties for there? perhaps been. and bit competitors bidding that more the

or more have available, Yeah, have that definitively I available, are think there's know rumored, things properties more coming. to long come market coming been now we

favorably us. up sets certainly that So for

And environment how that? about the pricing within

but can slightly, are down they I've what multiples. so what remember ever for they People are difference command things in and could any or Maybe that. pricing. not they still going expecting come high have noted still

much, so Kevin. Thanks Okay.

Yeah.

next Please stand by question. for our

Our line next Research. Wolfe the Walton Myles question from of comes of

is now line Your open.

morning. Thanks. Good

morning. Good

I source side? was Kevin, upside can the the what's on OEM wondering, but and the the of guidance on you aftermarket, follow being getting comment raised. if better I the can OEM

improving, the on are can and I'll rates order deliveries Jorge to build the the chime give OEM But my you and we're in. thoughts finally side. starting see build improving, are book

it. the that's So really genesis of

some increases the production I'd Generally, that our rate business sees of Yeah, to the when comments. Kevin's sub-tiers offset from level echo there's demand. in OE

in produce rates the will optimistic to as continue cautiously aircraft go are future. moving they we and So, more the up we're forward that

And in this one Mike. was $XXX Okay. full Working the for I the consumption, the capital slight a quarter, source million at in it expectation for the first think What's then point? year quarter.

came hard it It's out. over the how say year. million peak about during plays course From trough $XXX exactly COVID, of to to the out

I we're math that to guidance the close back gone but Not be close. back in. you that all Though there. around hard closer If to in quarter, it's getting exact at pretty to but max should there, amount that, think the look by quite we're give having of

a type we don't and So see past we quarter sizable this future to expect of saw the quarters. uptick

Okay. Thank you.

stand for Thank Please question. next our by you.

line David question comes next of Our from of Strauss the Barclays.

is now Your open. line

Thanks. Good morning.

morning. Good

on it if think looks point above at this Kevin, the, volumes do Where now on we side the like, so levels? just revenue look aftermarket that back – revenues are to levels. you relative your are to pre-pandemic XX% pre-pandemic XXX aftermarket XX%,

Yeah, still right in to to back saying But gets think what us light That in up. more I XX% fly pre-COVID. you're you're to XX% the were come percentage think our volume we're I and we about potential people the as still in really has where that numbers.

chain? comments supply supply I Okay. further chain, some issues know the now? out would on in And you you've any pointed on your How past. three months characterize

Yeah, I chain think to ramp support has supply up. done a trying job the and recovering nice our

we've suppliers. in be predictable seen mentioned, point. getting better well. bit think the to components that's a general little pain continue more stable as a out of I minor and But terms say generally, I'd of I performance as Electronic

relative ability to what months and and about your maybe three, hire Okay, to ago? retain six

market don't again, significant technical bit any little Still engineering But of retention run of most in well. as really process. the improve our there higher Yeah, seen Definitely locations bit at a into we've this on a Sure. labor. through and overall of issues we've I tight of little production think improvement terms labor expertise. the signs the

very Thanks All guys. right. much,

Sure.

Thank you. question. our hold next for Please

Our Research. line Stallard of the comes from Robert Vertical next question of

now Your open. line is

morning. Thanks so much. Good

morning. Good

you. with start I'll Kevin,

in you towards increase to recent you just lap sustainable also these aftermarket, looking the low do how this here, very is, most particularly price old that retirement? of clearly the quarters. and the and start end on But aircraft forward, rates the year as very of think given all, of First growth strong

Well, book how continues to to evolve. I guess the order see we'll have

as and continues course on landings increase, see Of all we depends continued flight we'll then takeoff – activity to and if it the strength.

opening from of on think that we hard good innings any except China have that But really but see and do slow I things some just the improve to seeing But at the OEMs ship we're continue the it see will to back in to how expect parameters put down to to numbers. we'll it's year. have for coming point as here, to start to it unfolds. more,

then and Mike on from interest follow-up Okay, a the rates.

On optimistic and the been actually thoughts flexibility market, TransDigm what forward from rates occur. there's here. be might does be what wondering that debt might if what of sort adjust some down that rates on coming about to chat your interest I going was interest

Yeah, generally capital don't go. interest with we rates, a position take on regards structure and going where to they're strong the to

delivery As business trying than rather on as our can, of we've quality and we said rates we're time predict keeping before, to of the in on might parts high go. focusing as where

That a rather that collars bit, said, of to bit down approach. different And new a if about down SOFR a get X% take some we a did so float rate. did when did we than that of we swaps, the this hedges, we'll past quarter do rates benefit

week. when some see So XX-Q it's of the in filed you'll later that detail this

which go percentage notes. rate benefit and I And they bank bring billion the rates a take two that the but market of We right. points, debt the sense we math then notes and or prepayment $X rates could can pay so by can did still refi, going we've got overall re-price down lower step if out makes it forward. on if the mean on always, in can you There's to you just back if three enough, also, the as that you come cost latter, down of and some so get rates – we breakage of it's out penalty, can those earlier, fixed the take and our

Thanks That's great. much. so

our stand Please question. for by next Thank you.

of comes line from Epstein America. the of Ron Our with next question Bank

Your open. line is now

services-based, in said shift? targets Jordan This is know guys view that I just And Levine to financial your be strategy being morning. question pursue, Calspan. on should Good you services a but profile I guys as you fits departure to company a we in that M&A more expect on the the the or had Ron. pipeline? a we your also, it should Hey!

I in don't change approach. expect any think our we

to returns are Our testing proprietary, that engineered, it us. approach might a we highly itself and lends how we'll our this this this to certainly see markets new up case is highly other equity-like think us products any explore acquisition our within interpret to engineered shareholders. find product, but opens to successful aerospace are you a businesses When always deliver direction we highly defense, produce with in and I and absolutely we private and it report, for shouldn't as

comment business produce this to the come that components our as you Jorge, anything returns find that? of expect do businesses. have same from on We should we've to types

do we've numbers proprietary fudging We like They as would I type characteristics But other as defense, a their highly closed the that evaluated add, great partner the And that of in we acquired. it. very They Yeah. that changing criteria. yesterday. primarily first attributes excited aerospace we excited of opportunity, it say, with were or testing. we businesses no well. there we any the customer-based, seen evaluated many was which acquisition, saw about we've are the and and as very I'd we engineered

it. We the generate perform about expected performed acquisitions, have very acquisitions as typical so past that did returns excited to other we're and expect, we

so Awesome! much. you Thank

Sure.

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Our line Kahyaoglu next with of the comes question Jefferies. from Sheila

now line open. is Your

Good morning, guys. It's Sheila.

On last… the

morning. Good

people Usually name, up mess my last but… morning. Good

I thought you. to great, was tell I have She so

out the you call XX% XXXX pointed last XXXX, about is were price Kevin. volumes since XX% levels On below implying

new you another shortage the this or points of rounding planes… that just to XX of Strauss's Is to implied XX quarter. response plus-up question, So I think in prices is

don't just of of so was was exactly the I volume looking and I to you to I on comment from missing extent, We apologize simply back pre-COVID I what I view. to point to a confused. saying XX% at I'm there's XX% look levels. volume that not price referring if That's think still if

We will still over coming volume but has still we anticipate ‘XX. activity there we – don't that all the is returned anticipate so, or that to not flight return in year the

Some ’XX will fully we fall of it in anticipate. to

‘XX market were just outlook and a you guys think Okay, about and that's maybe ‘XX the and beyond post what's helpful. thinking you ‘XX, as And like volume on after then then normalized opportunities that? about basis

ahead Mike. Go

I to year along, skis give on here. I we'll here. when want in said detailed We're from started all that give for be with terms forecast just next so, get go we bottoms-up XX over think or Sheila aftermarket the the point, and still lumpy out the volumes opportunity commercial changing and we recovery where guidance predict our are it. could as getting of don't months we've this our month and coming think could Things quickly

Okay.

to announcements we And be so don't accurate has We give and think more proven on do bottoms-up I again that to than allow a you Sheila, us tell our know as from we forecasting, expectations. them teams high.

sure. Thank Yep, you.

next hold Please for question. Thank Sheila. you, our

Our comes RBCCM. the from question next Ken of Herbert line of

Your line now open. is

Yeah, morning. hi! Good

Good morning.

the Hey and drove us, other that prioritize impact? greatest increase possible pretty tailwinds you rank some the increase in guide it Kevin, update broad-based sounds to in full the of increase fiscal look for like year it where it's you're when aftermarket for the as ‘XX, the look the is China sort there. at But or at or maybe what maybe seeing you order to

one. Jorge that take I want to

visibility in or Yeah, have per a guys trends the I know, specific we particular no inventory you into se. think as region

is the it Our passenger sub-market bounce largest and across growth in back seeing sub-market, is that units. seeing multiple we're which operating that

cargo businesses improvement of While some of some is on well. belly in the as we cargo down, those are terms seeing

all that of units commercial are the the So rebound seeing would support recovery. operating in say the aftermarket generally I our

how on that, the anything just opportunities within particular I And of interior Great. or of looking? side? about are in I there businesses of that wide-body aircraft? trend passenger you think think than out some that maybe better the and the Is doing When seeing is on retrofit

but interiors road fleet, We're for the say probably utilize following modifications nice similar they that's trend. beneficial would recovery are quarters to few refurbish, a over the obviously I there. a and down existing continue seen seeing generally, as last that potential etc. We've

Great. Thank you.

Sure.

Thank stand for question. you. our by Please next

next the Gautam Our Khanna Cowen. of TD comes line of question from

Your open. line is now

guys. Hey! Good morning,

morning. Good

traditionally to follow or on of – submarkets, flight the seeing discretionary product can you any on sort whether others. Just aftermarket up differences give couple us? you across, are what critical any in or kilos demand flavor weaker that or you it last any have Any stronger than questions versus be of – kind of are

No, in some could the the in significant quarter, the majority but participating aftermarket units operating across are general and not think There seeing there. I the be in recovery. any across puts we're takes commercial any given differences

Okay.

I think maybe…

of strong the transport commercial as you To revenue aftermarket the that, portion stronger and and to small jet add is jet than know. aftermarket a very overall is as business well business helicopter, but and helicopter

could a willing EBITDA leverage your to much be Yeah. Kevin, you environment? to up – Like debt to to And in the ratio? speak with would maybe right deal, this much how comfort how you take

we're as historically. have the think operating in comfortable same we range I

forecasting, sure into we that have for we we we see available get don't cash and business, after make available opportunity our enough the we on we can that said, Mike As run horizon go and any it.

don't any I see limitations. So

We're I as we operating comfortable seven historically in times. have, right five within that the same spot. sweet think to we're range

the too to I start to continue in some future. go forecasts we probably that like rates think heard, down would not this operate and distant is there's to will you as where

This is good.

so successfully navigated have out this the to will and We come we continue far other side stronger.

I we where feel we're comfortable So are. like

to to want that? you anything have you do add Mike,

that's I think right.

six it's time just important can sort That's we equation try leverage as the to a in feel right what far times part how said the of kick level the the As right? of always manage But many the and we not just level, maturities? dependent that. you leverage and before, comfortable as always we out to on then a area, is overall

you. Thank

by question. Thank stand our next for Please you.

Peter the next Our of comes from question Arment line of Baird.

is now line open. Your

everyone. morning, Good thanks. Yes,

morning. Good

morning. Good

just and as you've quick ability maybe this price, that kind price. kind inflation and has one pass a feel of Any up, of in Kevin, volumes morning. activity environment. along changes curious on Good just seen your picked just to overall

inflationary don't see an any environment. still is This I changes.

Our to try goal That's is to, to do. as pass we inflation. always, what along

the likes. all increases I from in the seen think of we've airlines ticket price reports

have would market I successful of So all as perform. needed passing in this say we has to been along the

Okay. follow-up, less overall And China in XX% terms quick revenue. your or just around On than of of mix overall a follow-up. XX%

don't We so splits. through geographic and actually we know. We OEM, of give that don't we Well, don't know. distribution lot actually a sell

way to think at idea it the an activity, model missing that from is now. to you gives I missing business. from still to what's look the And is pre-COVID from of our flight what

still there's remarks, his activity to still there's has flying but that yet, as – will. like a of a China materialized Jorge And alluded certainly chunk looks it in a

Yeah, to compared considerably lagging but moving in the it's the the right international obviously is domestic, direction. still

Thanks so much.

hold question. open. your is Deuschle our you Thank for Scott for Please next Crédit your question. Suisse, now line with

Hey, good morning.

Good morning.

exercise given model generating their historically perhaps pricing in which are airline than power become current greater kind of profitability manner approach. per the could off more profitable, Meaning, if value-based airlines with is mining you've to inflation, course, but pricing models to in profit cycle. response we a your see and does what airlines consistent your done value-based that's relative more at you to your take Jorge, all continue on move of

into play. profitability airline really say doesn't I'd come Yeah,

and stated on better inflation. market is always pricing based objectives do than our we've price the As to

profitability the that top in the inflationary we're customer to at that. looking the don't get through business. of real anything some we are that with seeing the environment, start the trying like obviously higher inflationary the on price base of of or costs But we're pressures flowing So

don't for do Okay. can Calspan following you three or an up side, driving there have company And on drivers a price to most Calspan, you realization is and which impact that then sense have there to backlog a the you price will ability have then And work just accretion of to value start the does lot price. there? achieve the to on of quickly get on before

business right. stool, price the is that the value value We're we not base see. our products the to own. to make change sure profitable going want managing trying and make of then to across Calspan frankly, we view that's to creation We're not and say, Yeah, change we're to reflect innovative three-legged of be we I the out with sure trying a structures that's would costs to that portfolio pulling on solutions cost and and getting to customer that provide it's always companies going the able of the any we're to the

we've leverage to and we're hope obviously on to process. and in past a closed It's business. we optimize able all well acquisitions, looking be just do to managed So, like is able been It's three to been the great it run be acquisitions. the but going to our with

just last clarification. Kevin, And question to a Okay.

M&A the pipeline is You than said stronger typical.

transplant? longer here, typical are as term experience the define you pipeline you As are of reference is than saying been the you past or M&A years typically the to few it's across stronger referring period your

than right now, is more we're lot me take and busy of would and we've There's linearly value right typical last there. years. I doesn't at team busy, the Yeah, It's a couple very the you course, pipeline than the in that now. but cannot, but so traditionally closings experienced protect face

Right.

Okay, thanks guys.

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Good Hey! Thanks morning, very everyone. much.

morning. Good

XXX to out? comes shouldn't Is set with for reason of a that a be XXXX any very wherever about a same off philosophy specific the to not profitability basis the possible normal there quarter, in and a case of necessarily roughly that ask points has I the, year, obviously in next to have the wanted strong believe margin framework any year, businesses. but for the guidance company think expansion year that I it's as of

things when to normality, basis a like, when what that think to margin, apples-to-apples that's looks XXX to I points and and stabilize, we I on think we fantastic have XXX is tried per models always think back target. achieve I get year expansion that whatever

out these just follow-up maybe obviously. with see in kind things to in still public of market, see value there lot then all driven Okay, pretty solid as okay, regard valuation of the activity the And some days. extent plenty we pipeline, kind the at does a that great. or markets being there? private what A of that M&A valuations and is To you do inhibit by

generate think given I think turn with there's value, the as don't our don't to when long plenty products. I remain of we necessarily, up I we ability value out away convicted prices there. - as go individual property

So, the what to much. we have value, pay, factor doesn't in too

prices you're that kinds successful to highly look When products concerned you we criteria a engineered have their find So if products, higher. we're run for, over of the go going that with those lifetime. not a high, stay matches business

Great. Thanks much. very

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Good Hey! question. for taking morning, Thanks a guys.

Good morning.

morning. Good

Kevin, on you to half you're margins a about EBITDA maybe were what to question doing Calspan, of just think said discuss now. I the go back

Just is testing services, transplant prevent up is there to of these that type you to levels with there the that are they margins kind do of think given from provide anything margin? you services that more path and historical would these or a get driving that

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it There's definitely we'll room value modeling that we're see. it will, to generation. right lots for But but have now, not of

market, the can noticeable within maybe out discernible there, marketplace? or additional Okay, any after some defense you the trends perfect. growth, then growth, have you might color exposure defense give OEM And there, market any on consumable parse just more of but

Yeah, I'll that. think

the know, As the from out aftermarket. don't really you defense we OEM separate

are I spend government It's the environment and in they difficult terms as performing of going figure Ukraine to support are best they how out a relatively to funds. think tracking. how equally are both continues to its do

the fact remains bit I steady provided solicitations we outlays timeframes. seeing look slow our but the but general terms the little as in a – still of I've commentary improvement orders we're outlays, a of closing historical slow in into the are So think opening terms in that at the the in

not real And about seeing to from it. your just those orders? costs Got able then get you we're last you with one new market issues get on fixed of are topic, prices through pass the and pricing to are defense same the hearing or in or reopen some grappling task being just contracts until able that you

terms. Yeah, specific contract I really don't get want to or into comment

operating units you of each independently the the contracts of and As out speaking our government I be shape turn. with go to know, would

enough. fair Okay, Thanks guys.

for you stand next your questions. for our Thank by Please question.

comes question Morgan Liwag next line of Our Kristine Stanley. from the of

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morning. Good Hello!

Hey! How are you doing? guys

Great. How are you?

Wonderful to hear.

for your sustain Can of from extending something turnaround this the something labor. hearing about how – still from maybe hearing from environment to is is is longer? benefiting of some long times some that pricing are, that are you that that So if could facilities, and is part talk you some we're as part months aircraft that then six that and months and three you MRO shortages even and as from power

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here. just could I tack If Great! on a question second

think that those what orders to think specific market, any on to parts, of the in percent have you're providing able you the the when facing you terms you and there order are when of you about available about that market? shortages So are activity deliver in

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Thank guys. Great. you,

Sure.

Sure.

would Stemen your Thank you remarks. to this like closing to At for time, question. now turn Jaimie back I for it

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